Short answer
Yes. But not in the way most people think.
You don’t need cash savings if you have usable equity in your home. That equity can often cover your deposit and purchase costs.
How it actually works
Most first-time investors assume they need to save a large deposit before they can get started.
In reality, many use the equity in their existing home instead.
As your property increases in value and your loan reduces, you build equity. Lenders will typically allow you to borrow up to 80% of the property’s value. The gap between your current loan and that limit is what we call usable equity.
That equity can then be used to fund the purchase of an investment property, including the deposit and upfront costs.
A simple example
Let’s say:
- Your home is worth $900,000
- Your current loan is $500,000
At an 80% lend, the bank may allow borrowing up to $720,000. That leaves $220,000 in usable equity.
That could be enough to purchase an investment property around the $600,000 mark without needing to use your savings.
What most people get wrong
This is where things often fall apart.
Most people assume equity is the same as cash. It’s not. It’s borrowed money secured against your home, and it still needs to be repaid.
There’s also a common belief that if equity exists, the bank will automatically let you use it. That only works if your income supports the additional debt.
And finally, no savings doesn’t mean no risk. You’re increasing your total debt across two properties, so having a buffer in place still matters.
What lenders actually look at
Even when using equity, lenders still assess the full picture.
They will look at your income, existing debts, living expenses, and overall borrowing capacity. They’ll also factor in expected rental income from the new property.
If the numbers don’t stack up from a servicing perspective, the deal won’t be approved regardless of how much equity you have.
When this strategy makes sense
Using equity instead of savings can be a smart move if you’ve built strong equity in your home and your income comfortably supports the additional lending.
It’s often used by people who want to enter the market sooner and start building a property portfolio without waiting years to save a deposit.
When to be careful
This strategy isn’t for everyone.
If your borrowing capacity is already stretched, or you’re left with little buffer after the purchase, it can put you under pressure. The same applies if the deal only works based on future assumptions like rate cuts or strong rental growth.
This is where getting the structure right becomes critical.
The structure matters more than the idea
Using equity is only part of the strategy. How the loans are set up matters just as much.
In most cases, the lending should be structured so that:
- The equity release is split from your existing home loan
- Investment-related debt is kept separate
- You maintain flexibility for future purchases
Done properly, this can improve flexibility and help keep things clean from a tax perspective.
We broke this down in more detail in our March edition of Your Real Estate Guide, including how loan splits actually work in practice and why getting this wrong can create issues later on.
👉 Read the March edition of Your Real Estate Guide here
You should always confirm tax implications with your accountant before proceeding.
We Can Help You Make the Right Move
If you’re considering buying, investing, relocating or refinancing on the Central Coast, we’re here to help you map out your next steps with clarity and confidence.
At Shoreline Lending, we specialise in guiding Central Coast homeowners and families through every stage of their lending journey, with a relaxed approach and expert advice.
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